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Something special is going on at JPM.

Morning Coffee: JPMorgan's top secret team, and the new nightmare scenario at Deutsche Bank

Nothing like a little touch of James Bond to make a banking job seem more glamorous.  According to “sources”, JP Morgan is recruiting fintech developers in London for a project that they won’t discuss. They're making people sign NDAs as soon as they show any interest in working for it.  They are even – and for anyone familiar with banking IT departments, this is a real show of seriousness – making sure to only make permanent hires for the new project, rather than using contractors who might be more likely to gossip.  So what’s up?

It’s hard to say.  TechCrunch understands that they are hiring “high level developers” with “full stack and cloud based dev skills.” None of this really offers any clues, but the fact that the new project is intended to be run entirely separately from JPM’s existing technology and business perhaps suggests retail banking rather than an equivalent to Barx or GS Marquee.  Only a few weeks ago, JP Morgan closed down its unsuccessful millennial-focused brand Finn, so plenty of people are guessing that the top secret “skunkworks” project is an attempt to get into the same space as Marcus.

However, if it’s a consumer-focused project, where are the branding and marketing hires?  Why would JPM be paying up for top-level cloud developers when an online banking system can practically be bought as a shrink-wrapped software package these days?  Why build it in London if its main customer base is more likely to be connected to the American payments system?  And, above all, why the cloak and dagger stuff?  “Global megabank plans online brand” is not exactly the sort of billion dollar idea that you have to keep under wraps.

This raises the tantalising prospect that the secret JP Morgan tech team are looking at something significantly more disruptive, something that they really don’t want the market to know about until they have a viable product.  This sounds like it might be more in the payments space – a kind of “platform bank” that other services could be built on, or which could be used as the equivalent of cloud computing to let other banks concentrate on lending a customer service rather than having to keep up with the payments tech arms race.

Or might it be something even more radical?  It was noticeable from the big Facebook cryptocurrency launch that no big banks were among the first group of partners.  It’s also known that JPM was the first U.S. bank to successfully create and use a “stablecoin” of its own, and its Quorum system is an actually existing large scale blockchain.  There’s even a rationale to have London, rather than New York, as your test bed for cryptocurrency projects as there is less confusion about state versus federal jurisdiction, and, post-Brexit, you can expect that the regulators might be a bit more hospitable to innovation.  This is simply speculation, but maybe the super-secret team really is trying to change the future of money?

At Deutsche Bank, however, the future doesn’t look quite so exciting.  Both of the top level departures that have been rumoured in recent weeks – investment banking head Garth Ritchie and chief compliance officer Sylvie Matherat  - are still being rumoured, but now CFO James von Moltke is also on the rumour list.  Not only that, but the same rumours are suggesting that Christian Sewing will take direct control of the investment banking unit if Garth Ritchie leaves, rather like Jes Staley did at Barclays, but with substantially less public commitment to turning it around. 

The Bloomberg articles now contain a table to document all the management instability, and this is, as it always does, percolating throughout the organisation.  Edward Sankey, the co-head of European ECM and global head of equity syndicate is leaving to be head of equities at HSBC.  In New York, Mark Hantho (the head of capital markets coverage) and John Eydenberg (the relationship bankers for Apollo and Softbank, among others), are “in advanced negotiations” to go to Citi.  What’s almost more worrying than the news of the departure is that it got into the newspapers literally before the contracts are signed; this looks like a total breakdown of management.  It’s hard to be optimistic about the future of Deutsche in either equities or the USA.


Printing Australia printed four hundred million banknotes on which the word “Responsibility” was misspelled.  Their customer, the Australian central bank, was “relatively relaxed” though, noting that “no one died”, and that the offending text was microscopically small and meant as an anti-counterfeiting measure. (Bloomberg)

At the world’s other big and troubled investment banking franchise, Nomura have announced a share buyback (financed from reducing their stake in the Nomura Research Institute) and altered the role of the chairman. (Bloomberg)

Suzy Welch of CNBC says there are two words you should never say in a job interview. They are “stepping stone” – one might be able to think of others. (Yahoo)

Highbridge Capital Management is closing its multi-strategy fund and Asia funds, among others, and concentrating on corporate credit investing.  (FT)

If you went to a small university off the beaten track of recruiters – even if it’s a comparatively elite and prestigious one – then you have to hustle a bit more to get into banking.  It also appears to be the case that once you have got into banking, you’re going to get bothered senseless, as the main hustle appears to be through alumni networks. (WSJ)

What do MBA students think about their business schools?  A survey of over 10,000 current students gives significantly different rankings from the normal ones.  The most interesting question is the percentage of students agreeing that “Competition is healthy, not hostile”, particularly when you consider that only the top 30 rankings out of 126 are shown.  The “My education inspired me to pursue an ethical career” response is already down to 80% by number 30, suggesting that number 126 might be well below half. (Bloomberg)

According to US psychologists, the five basic types of marriage are “validating, volatile, conflict–avoiding, hostile and hostile–detached”.  It feels strangely reminiscent of the possible kinds of relationship between Heads of Investment Banking and CEOs. (WSJ)

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AUTHORDaniel Davies Insider Comment

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